There are a lot of start up questions. Should I narrow the services I want to offer? Where is the best place to begin to look for clients? What do I officially need to do to get started?
So Many Pieces – Will I Ever Get My Biz Put Together Right?
TYPE OF BUSINESS
Let’s start with the type of business that you may need. Most owners begin their business by being a Sole Proprietor. This type of business is not separate from you. You and the business are one in the same. All profits that you earn in the business are a part of your personal tax return. Just like there is a place for employed earnings (W-2), there is a place for profits from doing business (Schedule C).
BUSINESS IS SEPARATE
“So if being a Sole Proprietor is the same as me, why do I have to be anything”, you say. Your business still needs it’s own bank account. You don’t want to mix your business revenues in with your household income. So you open a small business (find the cheapest/convenient) checking account. (Some may do this in a local credit union.) Then the bank account holds all the revenue of the business and the expenses of the business. The result is the profit of the business. Money can be moved from this account to the household account – a draw against the cash of the business. But it is easy to use the revenue and the expense to post on the Schedule C at tax time.
NEED AN EIN NUMBER
Your business also needs its own EIN number. You don’t really want to use your social security number out in a bunch more places. EIN numbers are issued by the IRS. Go to www.irs.gov and key in the search term EIN. It will tell you how easy it is to apply on line for the free number. Then your business has its own number. Get the EIN before you go to the bank.
IF YOU ARE BIGGER
If you are starting a bigger business, say a large floral shoppe, or a bakery, or a manufacturing plant, then you may talk with your attorney and your accountant about incorporation – so the company has shareholders. You own the shares. There are some tax advantages for corporations, and there are some legal advantages too. Talk to your CPA and your attorney about those.
More about what you officially need to do to get started in the next few posts.